The figures, announced by the Office for National Statistics on Thursday, mean the chancellor will be able to deliver his autumn statement on 5 December against the background of an economy that has returned to growth.

"There is still a long way to go, but these figures show we are on the right track. This is another sign that the economy is healing and we have the right approach," the chancellor said.

However, the ONS pointed out that GDP growth – the strongest rate since the third quarter of 2007 – had been artificially boosted by two short-term factors: the Olympic Games, which fell in July and August, and the bounce-back from June's extra bank holiday for the Queen's diamond jubilee.

All of the income from Olympics tickets was counted towards economic output in the third quarter, whenever it was spent, and the ONS believes ticket sales alone may have added 0.2% to GDP. It said it was "not possible to quantify" other effects, such as increased employment and a boost to creative industries.

In the second quarter of the year, when growth declined by 0.4%, the ONS said output had been depressed by the extra bank holiday cutting the number of working days, and could be up to 0.5% higher in the third quarter as a result.

Amid a storm of criticism of the government's deficit-cutting strategy, including a major anti-cuts march last weekend, Osborne used the figures to insist that his approach was helping to build a stronger economy.

"By continuing to take the tough decisions needed to deal with our debts and equip our economy for the global race we're in, this government is laying the foundations for lasting prosperity," he said.

Ed Balls, the shadow chancellor, welcomed the return to growth, but said: "This is no time for complacency and wishful thinking.

"Today's figures show that underlying growth remains weak and that our economy is only just back to the same size as a year ago – 12 months of damaging flatlining which has seen borrowing rise in the first half of this year.

"And with living standards falling, more tax rises on the way, small business lending down and the eurozone still in crisis, it would be very unwise of David Cameron and George Osborne to just sit back, cross their fingers and hope for the best."

The ONS gave little breakdown of which parts of the economy had expanded most strongly, since Thursday's release is an early estimate, but it believes construction suffered a 2.5% decline in the quarter, while distribution, hotels and restaurants expanded by 1.6%, transport by 0.8%, and business services and finance – which includes the crisis-hit banking sector – by 1%.

City economists said the 1% expansion was larger than they had expected, but warned that it was unlikely to be repeated in the months ahead.

Chris Williamson, of the data provider Markit, said: "The government will most likely make the most out of this good news, but unfortunately it is unlikely that the UK will see such a strong performance again for some time. In reality, the danger is that this figure fuels a misguided belief that the economy is on the mend, when in fact there is plenty of evidence to suggest that momentum is being lost again."

He added: "There is a real risk that a return to contraction might be seen again in the fourth quarter." Treasury officials conceded that the strong 1% growth rate was unlikely to be repeated in future quarters.

Howard Archer, of the consultancy IHS Global Insight, said: "While the third-quarter GDP growth of 1.0% is encouraging and welcome news, the UK is by no means out of the economic woods and further relapses remain a very real possibility. Fiscal austerity, tight credit conditions, muted global economic activity and still serious problems in the eurozone are all likely to hamper growth."